We came across a bullish thesis on Rocket Lab USA, Inc. (RKLB) on Substack by Steve Wagner. In this article, we will summarize the bulls’ thesis on RKLB. Rocket Lab USA, Inc. (RKLB)'s share was trading at $18.66 as of March 3^rd.

A rocket launching into the night sky, carrying a satellite payload.

Rocket Lab (RKLB) delivered a strong Q4 2024, with revenue soaring 121% year-over-year to $132 million, bringing full-year revenue to $436 million, up 78% from 2023. Growth was fueled by an increased launch cadence, demand for hypersonic test launches (HASTE), and expansion in space systems contracts. Despite these positives, the company remains unprofitable, posting an adjusted EBITDA loss of $23.2 million in Q4, albeit slightly better than expected. While margins improved within guidance, soft Q1 2025 revenue guidance and another delay in Neutron’s launch timeline overshadowed the strong results, causing the stock to decline after earnings. The market’s reaction underscores the importance of Neutron to RKLB’s long-term trajectory, as the company continues to invest heavily in its development while facing competition from SpaceX’s Falcon 9.

The biggest concern for investors is Neutron’s delay, now pushed to the second half of 2025 from mid-2025. Management downplayed the shift, citing no major technical issues, but the delay highlights the inherent risks of rocket development. Key milestones, including full vehicle integration and final Archimedes engine qualification, remain unfinished. Neutron’s success is crucial, as its reusability would significantly improve RKLB’s unit economics, but profitability won’t come immediately—the first flight won’t generate revenue, and booster recovery isn’t planned until 2026. In the meantime, the company continues to burn cash, with Q4 capex rising to $21.5 million as RKLB nears the final stretch of its projected $250-$300 million Neutron investment. While the company’s $484 million in cash provides a cushion, rising expenses and uncertain timelines raise concerns over when profitability will be reached.

RKLB’s backlog remains robust at $1.07 billion, with 50% expected to convert to revenue within 12 months. However, guidance for Q1 2025 came in weak, with revenue projected between $117 million and $123 million, below analyst expectations of $135.7 million. This is partly due to lower launch average selling prices (ASPs) from customer mix shifts, slower milestone payments in space systems contracts, and higher Neutron development spending. The company also revised its Electron launch expectations for 2025, lowering its forecast from 26+ to 20+ missions, attributing the adjustment to customer readiness rather than demand weakness. The market, however, viewed this unfavorably.

One bright spot is the HASTE program, which continues to see strong demand from the Department of Defense for hypersonic missile testing. This segment helps diversify RKLB’s revenue streams and reduces reliance on commercial satellite launches. While the broader space systems business remains stable, backlog growth has slowed, emphasizing the need for Neutron to ramp up as a competitive alternative in the medium-lift market.

Ultimately, RKLB remains a high-risk, high-reward play. The company is executing well on its existing business, but Neutron is the make-or-break factor. If successful, it could dramatically shift RKLB’s financials and market position. However, continued delays and cost overruns could challenge the investment thesis.

Rocket Lab USA, Inc. (RKLB) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 37 hedge fund portfolios held RKLB at the end of the fourth quarter which was 16 in the previous quarter. While we acknowledge the risk and potential of RKLB as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than RKLB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.